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Walter Updegrave

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Jason Thomas

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Joseph Anderson

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Alan Clopine

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Published On

August 7, 2017

3 Retirement Tips from the Very Rich

Walter Updegrave from RealDealRetirement.com analyzed a recent survey of the needs, goals, and concerns of very wealthy investors, and shares some useful retirement tips from the very rich for the rest of us. Also, 12 common sources of tax-free income, 4 tax breaks that may be on the chopping block, the basics of Medicare, and Medicare mistakes. Plus, Joe still wants to grow a ‘fro, and who doesn’t like the Eagles? (hint, it’s Big Al.)

Show Notes

(00:54) Andre’s Hair & Medicare Basics
(09:48) Walter Updegrave: 3 Retirement Tips from the Very Rich
(20:56) Walter Updegrave: 3 Retirement Tips from the Very Rich
(39:59) 4 Tax Breaks That May Be on the Chopping Block
(49:35) Medicare Mistakes with Jason Thomas, CFP
(59:28) Al Dislikes the Eagles & More Concerns of Wealthy Investors

Transcription

Financial readiness trumps age. I get a lot of questions that go something like this, “I’m going to retire at 66, here’s what I have, am I prepared?” No, it should be the other way around. It shouldn’t be the age it’s the determining factor, it should be how much money do you have, or whether you’re prepared to retire. – Walter Updegrave, RealDealRetirement.com.

That’s Walter Updegrave from RealDealRetirement.com. Walter analyzed a recent survey of the needs, goals, and concerns of very wealthy investors – and came up with some useful retirement tips from the very rich for the rest of us, which he’ll share with us today on Your Money, Your Wealth. We’re also talking taxes and Medicare today – 12 Common Sources of Tax-Free income, the 4 tax breaks that may be on the chopping block, the basics of Medicare, and Medicare Mistakes with the newest member of our education team, Jason Thomas, CFP. Now, here’s the man that really wants to wear his hair in an afro, Joe Anderson CFP, and a guy who really doesn’t like the Eagles, Big Al Clopine, CPA.

:54 – Andre’s Hair & Medicare basics

JA: I’m very excited. We have André workin’ the desk today.

AC: I know, it’s always a pleasure.

JA: And that hair is so unbelievably awesome.

AC: It’s like a throwback from the 70s. Maybe 80s. The 70s and 80s, kind of a combo.

JA: It just makes me smile. I mean it is the most ridiculous thing I’ve ever seen in my life, but it’s the most awesome thing I’ve ever seen in my life.

AC: He carries it off, doesn’t he?

JA: Oh totally.

AC: It’s kind of like the days of the afros and the big hair.

JA: Huge! I mean he’s like a seven footer with that hair, but he’s actually five foot four.

AC: Yeah. And it’s like jet black so you can’t miss it.

JA: Oh yeah. I just want to smell it. (laughs)

AC: (laughs) I wouldn’t go that far.

JA: It’s like a microphone. (laughs)

AC: Oh boy. You’ve gone back to the early days of being taught how to do radio. We were taught to make love to the microphone. “Joe and Al, make love to the microphone.” (laughs)

JA: Oh let’s not go that far. Talking about Andre’s hair, here.

AC: Well, you were starting to go there with the big microphone. (laughs)

JA: Oh wow! Well anyway Well, welcome to the show. We started off with a bang here.

AC: Yeah we did. We’re already warmed up. And I will say that’s as good as the show’s probably going to get. (laughs)

JA: By far. A couple of quick things, housekeeping items. We’re doing a full Medicare video series. Talk about excitement. We’ve got a three part Medicare series.

AC: Oh! How do I sign up for that? (laughs)

JA: All you gotta do is go to YourMoneyYourWealth.com and it’s right there. (laughs)

AC: Hold on, YourMoneyYourWealth.com

JA: Yeah. Well, I think Medicare is extremely confusing. Especially for me, that I still have another 25 years to figure it out. (laughs) So I need these 25 years to figure out Medicare, for me to get my elections straight.

AC: I got fewer years than you where I gotta figure this out.

JA: So let’s do that because we just did a TV show on Medicare and it’s fresh in my mind before I lose it. Let’s whet the whistle here to start off the show, just talking about some of the basics of Medicare and some things that people need to take a look at. More and more people, if you look at the statistics, it’s like, “Yeah, I want to make sure that I have enough money, I want to save money in taxes, and pass assets to the next generation, and I’ll reduce my fees,” and all that other good stuff. But health care is a really big issue. And so, what, the Senate kind of squashed the repeal of the Affordable Care Act for the time being.

AC: Even the skinny version, that didn’t make it.

JA: So it’s like well what the heck is going to happen? And does that dovetail into tax reform? And so, we could talk all sorts of different things today. But let’s kind of go through the ABCs of Medicare. What do you think?

AC: Well, Joe, let’s start out with there are 57 million people that actually are on Medicare right now. There’s 300 million plus in the country, so it’s quite a large number of people already on Medicare. And the cost of Medicare for our government, $684 billion, according to Medicare.gov, in 2016. That’s 15% of our federal budget just right there. So I guess, to start out with the basics of Medicare, Joe, it’s when you turn 65, first of all. 65 years of age, or younger than 65, but you’re receiving disability payments from the Social Security Administration. And there are a couple of diseases where you can get in, I guess. ALS being one, kidney disease being another one. So you don’t want those. That’s not a good way to get it. But I guess probably maybe one of the most confusing things, right off the bat, is how do you sign up, and when do you sign up, and is it voluntary, is it required, is it automatic, how does this work?

JA: You are automatically enrolled. So there’s automatic enrollment if you are already claiming your Social Security benefits. So if you’re claiming your Social Security benefits prior to age 65, and then when you do turn age 65, you’re automatically enrolled in Medicare Part A, and then you will start paying premiums for Part B. But then you will start having to elect do you want a Medigap policy, Part D, there’s all sorts of different parts that you want to maybe have in conjunction with just the traditional Medicare.

AC: Right. So if you’re receiving Social Security by or before age 65, you’ll automatically get enrolled in Medicare, Joe, as you just said. But if you’re not receiving, if you’re still working, and not receiving Social Security benefits, some people could be working and receiving the benefits. But let’s say you’re not receiving Social Security benefits, you’re age 65. Then you’ve got enrollment. An initial enrollment period, it’s a seven-month window. It starts three months before your birthday month of turning 65, includes the birthday month, and then three months after your birthday month. That’s when you’re supposed to sign up for Medicare. But many people don’t necessarily because they’re part of their employer’s health plan because they’re still working. And that’s OK, as long as you’re part of an employer’s health plan. They have this strange caveat that it needs to be a group plan of more than 20 or more employees. So you want to make sure you actually do qualify for this. But, let’s say you do, or if you’re covered on your spouse’s plan and you turn 65, you can wait. But you do need to sign up within 8 months after the employee health coverage ends.

JA: So I think it’s a good practice though, if you’re 65, just enroll at least in part A because you’ve already paid for those premiums through payroll taxes. It’s not free, Alan.

AC: (laughs) As I said on the TV show. Well, it’s free from the standpoint that there are no additional charges. You definitely paid for it. (laughs) And basically it’s like this, Joe, as long as you worked 10 years, 40 quarters, employment paying Social Security taxes, then you get Part A at no additional charge. That’s better than saying free. At no additional charge.

JA: Right. And then you’ve got Part B, and Part B will have a premium, and that premium ranges from, I don’t know, about a hundred bucks to 400 bucks?

AC: Yeah, $109 is the cheapest it is – this is 2017 – the highest It could be is $428 per month. And Joe, that’s if you’re single and your adjusted gross income is above $214,000, or you’re married and it’s above $428,000. So it goes from $109, that’s if you’re already subject to the Medicare tax. If you sign up this year, fresh, first time, it’s $134, and then it kind of ratchets up to that $428 amount. So yeah, I think that’s probably good advice. You’re turning 65. You’re still working, you’re part of your employer’s plan. Go ahead and sign up for Medicare, sign up for Part A, because there’s no additional charge. You may or may not want to sign up for Part B because there are additional charges there. You don’t have to sign up for it if you’ve got the employer plan.

JA: Right. I would always double check with the employer plan, because what we have found sometimes is that the Medicare would be primary, and then your insurance would be secondary. So just double check, because you definitely don’t want to go without coverage and get shocked because “Oh I thought I was covered” and then guess what.

AC: And some kind of minimal employer plans don’t even qualify, where you have to get the part B anyway, and if you don’t, there are penalties.

JA: Right. And then the premium on Part B is means tested. So it depends on your income.

There is so much more to know about Medicare if you’re approaching age 65. We’re creating a video series to help you with that, with Medicare specialist Jason Thomas, CFP, the newest member of the Pure Financial Advisors education team. Visit YourMoneyYourWealth.com to sign up to watch our new Medicare video series, and you’ll be notified as soon as it’s available. That’s YourMoneyYourWealth.com. And keep listening, because later in the podcast Joe, Al and Jason will cover some Medicare mistakes to avoid. But first, Walter Updegrave of RealDealRetirement.com analyzed a recent survey of the needs, goals, and concerns of very wealthy investors – and came up with some useful retirement tips from the very rich for the rest of us.

9:48 – Walter Updegrave: 3 Retirement Tips from the Very Rich

UBS: Retiring Old Cliches

JA: Alan, it’s that time of the show. Are you excited?

AC: Yes. Can’t wait.

JA: Have you ever heard of RealDealRetirement.com?

AC: I’ve just heard about it.

JA: It’s a pretty good site. RealDealRetirement.com. We have Walter Updegrave on the line.

AC: Been practicing that name.

JA: Yes. I had to clap it out – Up-de-grave.

AC: It’s phonetic. (laughs)

JA: It is. I’m on Hooked on Phonics, it’s awful. I got a Minnesota fat tongue. It’s… whatever.

AC: Well you got it, I think.

JA: Yes I killed it. I practiced a couple of times and now we got Walter Updegrave. Walter, welcome to the show.

WU: Thank you. And you did get the name right. It is phonetic and you guys got it right. I’m sure you can imagine, I get a lot of mispronunciation.

JA: Yes. We wanted to make sure our listeners got the Real Deal. Tell us about your site, RealDealRetirement.com. That’s pretty cool.

WU: Yeah. Well basically, I work at Money Magazine and CNN Money for a number of years, and I used to do a column on CNN Money called “Ask the Expert,” where people would write in asking questions about retirement and investing, but mostly about retirement. And I did that for many, many years. I was at Money Magazine for almost 30 years and left there a few years ago, and I figured, well, I still wanted to do something in this area, so I just started this site, RealDealRetirement.com. And basically, I publish stories on the site, a few stories a week, and then also CNNMoney.com and Money.com both pick up my articles. So basically what I try to do is educate people about all aspects of retirement, everything from saving to investing to turning savings, 401(k)s or whatever, into sustainable income. And my sort of theme is to try to keep it simple, and not overwhelm people with too much information, or not try to get too complicated.

JA: Thank you very much, because Alan I definitely need that. (laughs)

WU: I’ll try to keep it simple for you guys. (laughs)

AC: I was just thinking, Walter, I’m not sure we would ever get the opportunity to do “Ask the Expert.” I don’t think they ever give us that title.

JA: Never ever. Your recent article was Three Tips From The Very Rich That Can Help Improve Your Retirement. Let’s talk a little bit about what we can learn from the very rich.

WU: Sure. The survey was of 2,000 wealthy investors, people with a million dollars or more in investable assets. Some people might think, “well, this only applies to the wealthy,” but it’s not. A lot of these things that the wealthy do are really applicable to everybody else. So that’s what I tried to do – pull out some things that regular people could apply to their retirement planning, and sort of improve their prospects for retirement. The first thing that I pulled out was this idea that I called, “financial readiness trumps age.” And a lot of people, for example, on my site, there’s a place where people can ask me questions and then I answer them on my site and the answers also appear on CNN Money.com. I get a lot of questions that go something like this, “I’m 62. I’m going to retire in three years. How do I know if I have enough money? or “I’d like to retire in three years. Do I have enough?” Or some people who say, “I’m going to retire at 66, here’s what I have, am I prepared?” And I kind of think for myself, “no, it should be the other way around. It shouldn’t be the age it’s the determining factor, it should be how much money do you have, or whether you’re prepared to retire. And that’s one thing when they surveyed these wealthy pre-retirees and retirees, they found that most of them said, I think it was two-thirds of them said that it wasn’t a specific age, but whether they had a certain level of assets. And in their case of course, because these are wealthier investors, the level of assets was fairly high. Almost 90% say they needed at least a million. About 40% said they needed $3 million or more. But the big takeaway here is that in preparing for retirement, we tend to think of retirement as being linked to an age, whether it’s 65, a traditional retirement age, or 66 when a lot of baby boomers retire. But it really should be when you’re actually financially prepared to retire. And of course, you want to do planning up to that so that the two coincide. So that when you reach a reasonable age for retirement, you actually are prepared.

JA: It’s such a mindset, it’s a shift in mindset. And I think the reason why they have those dollar figures, is because they had the mindset, and they had the planning acumen to get it. It doesn’t necessarily they made a million dollars a year. It’s like the millionaire next door – they lived within their means, they saved more than average to get to a certain dollar figure, where they felt financially secure – versus like, “oh my god, I hate my job, I want to get the hell out, 65, I’m punching out!” You know? So it’s just a different mindset.

WU: Yes exactly. But one thing I would add on this is that, while this survey did kind of couch it in terms of dollars, because I think that people tend to think that way, “I need this amount of money” or “my number is such and such,” I’ve also written a lot about the idea that when you’re planning for retirement, I think it’s a good idea for people to think in terms of how much income they can replace when they retire, as opposed to maybe a total dollar amount, because a lot of people have trouble translating it. If you asked most people, “how much sustainable income, if you retire at 65, how much inflation adjusted sustainable income could $3 million produce?” I don’t think most people will be able to give a real reasonable answer. But if they knew that they had to say, well, I have to have an income of about $100,000 a year, $120,000 a year, or $60,000 a year or whatever, and if they look at their progress in doing that, I think it’s a lot more accessible to people.

AC: I think that’s a really good point because I think a lot of people just, in their mind, “I want to be a millionaire. Once I get a million dollars, I’m rich, I can retire.” Not realizing, at a 4% distribution rate, that’s $40,000 a year. That’s all.

WU: Right. And a lot of people are very shocked. That’s another question I get, “I have, whatever, $500,000, a million. How much can I withdraw each year to have this money last me until my early 90’s,” something like that? A lot of people are shocked to see that is not nearly as much as they think. For a few things – they’re not used to thinking in those terms, and also, they’re not thinking of the inflation adjustment, that the amount that you have, if you want your purchasing power to remain constant, you may have to increase the amount every year. So, it’s kind of a hard thing. It’s a well-known concept in behavioral economics, that people just aren’t very good at translating lump sums into inflation adjusted income, which makes sense. It’s not like a thing we do all of the time when we’re growing up, you know?

JA: Yeah exactly. Another interesting fact is that you still have to invest for growth. I think there’s this sense of, “Now I’m retired, I need to have everything in CDs or cash or bonds,” but we have such long life expectancies. We definitely need to still invest for growth.

WU: Oh yes. And that’s always been true. Even if people didn’t really realize it, but it’s especially true today because the yields on bonds and CDs and savings vehicles are so low. So for example, in this survey, you guys are familiar and probably a lot of people listening in will be familiar with the old adage that the percentage of your savings that you have in stock should be equal to 100 minus your age. So if you’re 60, you should have 40% in stocks, if you’re 70 you should have 30%.

JA: Whoever came up with that, Walter, should be banned, barred from writing anything financial.

AC: Well then they increased it to 120 minus your age because it didn’t work out. (laughs)

JA: (laughs) Yeah, the numbers didn’t jive. “What else can we come up with?”

WU: It started at 100, then in the early 90s I think, it went to 110, and then when returns really started to go up, then people wanted more in stock so we got to 120 and then it shifted back. But in any case, in this survey, they asked people about those sorts of formulas, and more than 60% surveyed said they disagreed with that. And in fact, a lot of the people, and I think it was more than half, had upwards of 50% or more of their assets in stocks – well into their 70s and 80s. So these were people who, the wealthier investors here, really recognize you still need this growth in your portfolio, for one reason, just to maintain your standard of living, to keep up with inflation. Now, I do think that probably, in the case of wealthier people, they’re more likely to passing the money along to heirs, and having a legacy and all, so that would also tend to argue for a little more. To invest a little more aggressively. And in my article, I try to say to people who may not have quite that a number of assets that people surveyed have that, OK, you do need to grow, but you may not have quite as much in stocks as some of the wealthier investors. And then I give them some tools that they can go to try to figure out a reasonable balance of growth versus safety in retirement. And on my website I have a retirement toolbox section that has a lot of different tools for things like figuring out an asset allocation, figuring out the probability of your money lasting a certain amount of time. Also some good tools for life expectancy. If you’re a certain age, what is, not just your life expectancy, but how long you might live, because most people are going to live beyond life expectancy. So those kinds of tools, I think, can help people realize, first of all, how long this money needs to last. And then, the sense that they need some growth. They can’t just huddle down in bonds or CDs.

JA: it’s funny when you say tools, the first thing about this survey – 91% of these people that they surveyed, had some sort of financial tool to help them, kind of guide their way. Either via themselves on the web, or if they hired an advisor, or whatever the case may be, they had technology and tools to kind of model some of this stuff out. Hey, Walter, we got to take a short break, hold on to that thought. Hey, guys. We’ll be right back. We’re talking to Walter Updegrave from RealDealRetirement.com. Show’s called Your Money, Your Wealth, we’ll be right back.

Southern California, are you on a smooth, well-paved road to retirement, armed with a good roadmap and clear directions? Join one of our Certified Financial Planners for a FREE Lunch N Learn in San Diego or Orange County, and learn how to pave your road to retirement. Visit purefinancial.com/lunch to register for one of these free events – lunch included! Learn about investing for your future, generating retirement income, retirement plan distributions, and how to minimize income taxes. Get on a good road to retirement! Visit purefinancial.com/lunch to register for a FREE Lunch N Learn in San Diego, Brea or Irvine. That’s purefinancial.com/lunch

20:56 – Walter Updegrave: 3 Retirement Tips from the Very Rich

JA: Welcome back to the show, the show is called Your Money, Your Wealth. Joe Anderson here, Certified Financial Planner, alongside Big Al Clopine, he’s a CPA. Thanks for tuning in. We’re talking to Walter Updegrave today.

WA: I think you bring up an important point though, about that 91% thing – they have financial tools and knowledge necessary for retirement, is that these people aren’t winging it. I think that really important thing. They got sort of a plan, and there was another little stat there that I thought was very interesting. They said 89% had a clear idea of where their income will come from once they retire. So it’s not just enough to know sort of, “OK if I do this withdrawal rate or whatever, I have a good chance that it will last,” but where is it going to come, how much is going to come from Social Security? How much is going to come from withdrawals from your portfolio? Do you have an annuity that’s going to create some? So you really need this sort of retirement income plan if you want to go into retirement having a clear idea of, not just how long your money’s gonna last, but where it’s going to come from. And really, if you don’t have that sort of clarity, you’re just kind of playing a guessing game, or in some cases, unfortunately for a lot of people, just wishful thinking.

JA: Yeah that is so true. I mean, when you look at a retirement income strategy versus somebody saving for retirement. Those are two totally different types of strategies. Both of them equally important. When I’m saving for retirement, you want to make sure that you understand where you should be saving, the tax consequence of the distribution, what your asset allocation should look like. But then, when you start pulling dollars from the overall portfolio, it’s a totally different game, because it’s like a sequence of return risk, you got longevity risk, and then you’ve got other expenditures that might come in, unexpected. You don’t have a paycheck. And so, it’s a little bit different type of planning. I think it’s a little bit more challenging, but it’s funny, people will go into retirement without any clue on where they’re going to pull each year to create an additional income on top of their Social Security, or pensions, or real estate income, or whatever.

WU: I agree. Sometimes it’s unfortunate that people will put a lot of planning and effort, and they’ll do all the hard work of saving the money and everything. And then when they get to where, sort of making it last and how much to pull out, sometimes they fall down on the job there. And it’s unfortunate, because you can withdraw too much very early on, or for example as I’m sure you guys know, because you mentioned the sequence of returns risk, sometimes you can have a great average return over a period, but if in the beginning of that period, when you’re pulling money out for retirement, you go into a bear market, the combination of the losses in the bear market, plus your withdrawals, can so deplete your portfolio of capital, that when the turnaround comes you just don’t have enough money left to really participate in it. So your money doesn’t last as long as if you’re thinking in terms of an average rate of return – and I think that’s a concept that’s beginning to get through a little bit more. It’s been around for quite a few years. But I think that, to the general public, it’s still something that’s probably not as well known as maybe it should be.

JA: Another very interesting thing that that kind of hit home with me with this survey, they’re talking about like the emotional anxieties. 64% of people surveyed here, they were more worried about not having a schedule then they were not having a paycheck – you know? And so, I’m a very kind of regimented person, and I have my schedule. I get up early, I work late, and I do things. But all of a sudden, when you don’t have that schedule, I think sometimes people don’t really dive in a little bit deeper. It’s not always about the dollars and cents. Another thing that was interesting, 59% it will take some time to adjust to retired life. So you have to practice it. And then this is – Al, I know this is definitely Al’s. He voted on this. “I’m going to miss my job and colleagues” when he retires.

AC: Yeah, big time.

WU: I’ll have to ask if that’s actually true. Anyway, you’re absolutely right in that the other part of this is – and naturally, I write mostly about the financial aspect of it, and you guys I’m sure with your clients, deal with the financial aspects, but there is this sort of whatever you want to call it – behavioral, emotional, psychological aspects, social aspect of it. And that is really just important, because as you mentioned, in this survey, people were more concerned about not having a schedule, because when you really think about it, a job, whether it’s 9 to 5, 9 to 7, 9 to 8, or whatever, however many hours, it’s kind of like a little framework, a little sort of skeleton around which we can base our lives. It’s an automatic planning tool for us. And when you all of a sudden pull that away, and all the social contacts that are connected with it, it’s a big change. So in this article, what I try to tell people, is to do a little what I and others called Lifestyle Planning, which is essentially, really think about how are you going to live the hours of your life? What’s going to fill your time? What sort of activities? Do you have friends? Do you keep up with social connections? Because all of these are linked to how happy people are in retirement, how well they adjust to retirement. A lot of times you hear people say, “Well, I’m going to move to such and such, I’m going to do this or that.” My advice is, to the extent you can, do a little trial run. You think you’re going to move down to wherever, another country, maybe? Spend some time there, see what it’s really like there, see what it’s like in an off season. So don’t assume that it’s just all going to unfold blissfully the day after you retire.

JA: I’m definitely going to have to work. I mean, here’s how ridiculous my schedule is. I get up at 5 o’clock. I go to the gym. It’s at the same time every morning. And I park in the same place. And then I had this girlfriend. We break up. And then all of a sudden like about two weeks after we break up she starts walking her dog. Right where – because she knows exactly where I’m going to be, every single morning. (laughs) “Hey, what’s going on?”

WU: You’re predictable!

JA: Right? Here’s where I’m at on Friday for a couple of beers. This is where I’m going to play golf on Saturday. I swear to god, she was everywhere.

WU: I hope the breakup was amicable.

JA: Oh yeah it was a really good time Walter. I’ll give you some stories, you can about that. “Nightmare on Market Street.” (laughs) Hey what else are you writing there on your website?

WU: Well basically, some of the topics really do range. I do a lot of things because a lot of the boomers are so close to retirement, or already in retirement, I do a lot of stuff on this sort of, “how do you turn money in a 401(k) or other accounts into sustainable income,” so the combination of how do you invest, or annuity is an option, so what should you be thinking about if you’re looking at them. So I do a lot of stuff with that. And a lot of the lifestyle aspects of retirement. But then, I also do a lot, even with younger people, and sort of trying to get them going, so that they’ll be prepared for retirement. And that really just kind of comes down to ways to try to impress on people how much you have to save, or that you have to at least save regularly. Maybe you can’t make the target. Everybody talks about 15% – that’s great, but for a lot of people just getting out of school or whatever, it may not be practical. So you start with something, and maybe you increase it by a percentage point a year and build your way up. And then, a lot of people are sort of in that middle, they’re getting toward that 10 year home stretch into retirement. And a lot of those people are realizing, “Oh, I didn’t save as much as I should have,” and they’re a little bit, “What can I do?” And I think that, for those people, I always try and give them some advice on, first of all, how do you know where you stand? How do you do a little quick analysis to see how much income you likely to produce, or what are your odds of getting the income you need, and then how can you improve your situation, by either saving, or, a lot of people don’t realize, even just something like delaying retirement a couple of years could really have a really big impact on how much income you can generate, how prepared you’ll be. So I really kind of cover all of those sorts of topics.

JA: Hit RealDealRetirement.com. That’s Walter Updegrave. Hey, Walter, this has been a lot of fun. I really appreciate your time.

WU: OK. I enjoyed it. Thanks a lot, guys.

All right guys we’ve got to take a quick break. Show’s called Your Money, Your Wealth. We’ll be right back.

Your Money, Your Wealth isn’t just a podcast, it’s also a TV show! Check out Your Money, Your Wealth on YouTube to watch clips on estate planning with attorney Nicole Newman, Trump’s Proposed Tax Plan, Social Security Savvy, all about the 401(k), and much more. Coming soon, an in depth look at Medicare, and reverse mortgages with retirement researcher Wade Pfau. Don’t miss the Your Money, Your Wealth TV Show – just search YouTube for Pure Financial Advisors and Your Money, Your Wealth.

It’s time now for Big Al’s List: Every week, Big Al Clopine scours the media to find the best tips, do’s and don’ts, mistakes, myths and advice to improve your overall financial picture – in handy bullet-point format. This week, 10 Common Sources of Tax-Free Income.

30:30 – 10 Common Sources of Tax-Free Income – Ventura County Star

AC: Joe, I had to dig deep today, or yesterday when I found this. I went to the Ventura County Star in California to come up with the 10 Common Sources of Tax-Free Income.

JA: I thought it would’ve been the Arkansas Gazette.

AC: (laughs) Well, I didn’t check there. But I stayed local in California. Anyway. One of the things, of course, is Roth IRA earnings. I’m going to save that for last because I want to kind of go into that. A lot of these things are just things you ought to know. You can receive dollars without having to pay taxes on it. The first one is a gift. When you receive a gift from somebody else, it’s not taxable to you. A lot of people don’t understand that. Your parents, your grandparents, your best friend. Depends on what the gift is. Let’s start with cash. So, you can receive $14,000 per year. There’s no taxation on either yourself or the person that gives the gift. Now, if the person giving you the gift gives you an investment, like a stock or a mutual fund, then when you receive that gift, you take over the basis, the tax basis, from whoever gave it to you. So, somebody gave you a $14,000 stock that they bought for $1,000. Well, when you sell it, then you have a $13,000 gain in that example. You will pay the tax on the gain. So yeah, there are cases where you do potentially have to pay tax. If you receive cash though, as a lot of people that give cash, parents, grandparents, whatever, it’s not taxable to you.

JA: And the person that’s the… gift-or… does not get a tax deduction. Sometimes they think, “Well, I’m giving this money.” Well no, you’re giving it to your child or your grandchild.

AC: Right. It’s not a deduction. It’s not income to your child, but it’s not a tax deduction to you.

JA: If you give it to charity and that’s when you get a deduction.

AC: The second one is rental income. Did you know this, Joe, if you rent your home or vacation cottage for up to 14 days, that rental income does not need to be reported? 14 days. So there you go, you’ve got some extra bedrooms. Airbnb? 14 days? (laughs)

JA: Sure, come on in. Yeah right. Andre, you want to come crash? 14 days. Teach me how to get hair like that. (laughs)

AC: It’s gonna take more than 14 days! (laughs)

JA: Yes exactly. It’s gonna take me 14 years to grow that fro out.

AC: Here’s another one, child’s income up to the standard deduction amount, which is $6,350 in 2017 in earned income. So you have a child that is younger than 18 that’s dependent. Actually could be a college student as well. They can make $6,350 in earnings with, maybe they work at McDonald’s or something like that. And it’s tax-free because they get the standard deduction. Inheritance. Did you know Joe, when your parents, grandparents pass away, and you receive an inheritance, that is non-taxable to you?

JA: I do know. Unless it’s a retirement account.

AC: True. That’s true. So if it’s cash…

JA: Let’s say real estate. Mom and Dad had a house, they die. Here’s what my Aunt and Uncle did. So my Uncle diagnosed with lung cancer. So he’s freaking out. He’s like, “Oh, I’m going to have to pay all these taxes.” They had a house in Tucson. It was worth 100 grand.

AC: He was worried about the inheritance tax?

JA: Yeah. He was worried about the estate tax. He’s got about maybe $100,000. Living off of pensions and Social Security. And he’s like, “OK, well I’ve got to start gifting this money out because the government is going to take this when I die.” I was like, “Well, what, do you got like $10 million?” “No. I’ve got my house.” “Well, how much is your house worth?” “Hundred grand” I’m like, “what else you got? “Well, I’ve got another hundred.” I go, “you have $200,000, don’t worry about it.” Because there’s a step up in tax basis, first of all. So let’s say you bought it for $10,000, it’s worth $100,000 now. You pass away, then the heirs will get a full step up in tax basis. So the cost to them, in essence, would be $100,000. They could sell it whenever. And if there’s no gain from the time they inherit it to the time they sell it, then it would be tax-free. Same with stocks and bonds and mutual funds and everything else.

AC: Right. Exactly, and as you say, Joe, when it’s a retirement account like an IRA or 401(k), you still have to pay the tax when you pull that money out of those accounts. And there is a required minimum distribution from a beneficiary IRA, a non-spousal beneficiary IRA, where you got to pull money out based upon your life expectancy. And that surprises a lot of people, someone, they inherit an IRA and they’re 27 years old. They got to start pulling money out the following year, I believe.

JA: You think they have a clue?

AC: Most of them don’t. That’s why we’re educating you. But I do get that question all the time, “Well, I just received a couple hundred thousand dollars from my parents’ estate. How much tax I have to pay?” Well, what was it? “It wasn’t a retirement account, there was a property, it was sold in the estate, and I just got a check.” Tax-free don’t report it on your return, nothing. It’s just tax-free. “Well, what if I get audited?” Well, what if you get audited? Just show ’em your bank statements. Here’s a $200,000 check I got from my estate. Boom, you’re done. Simple enough. Another tax-free item is life insurance received.

JA: Yeah, if you pass away with a life insurance contract, the beneficiary receives those proceeds 100% tax-free. That’s pretty cool.

AC: Yeah that’s cool. Child support, that’s another tax-free item. If you receive alimony, you have to pay taxes on it.

JA: Because the person that’s paying it to you takes a tax deduction.

AC: Right. Child support is neither deductible to the person that pays it or income to the person that receives it.

JA: (whispers) That’s why I’m single.

AC: Yeah that’s a good idea. Good, good call. House sale gains up to $250,000 of gain, or $500,000 for married couples gain on the sale of a qualified principal residence, it’s not taxable. So you bought your home for half a million dollars and you’re married, you sell it for a million dollars, you got a $500,000 gain. You’ve owned it and lived in it, both of you, for at least two out of the last five years, you don’t pay any tax. That first $500,000 of gain is tax-free. On the other hand, if there’s a $600,000 gain, you just subtract the 500 exclusion from the $600,000 – you pay tax on $100,000. And that’s contrary to popular belief is that’s not a once in a lifetime. You can do that every couple of years. Of course, subject to how much gain you have in the home that you sell.

JA: Right. You gotta have a lot of gains. I mean you’ve got to get lucky to use that every two years.

AC: That’s right. But if you if you get lucky, right? Now, if you have rental properties, the rules are much different. And that’s a little bit deeper than I want to go into right now, but just be aware, if you have rental properties and you move into them, you will get some exclusion, but not the full amount. There’s a calculation. Scholarships and fellowships are generally not taxable. So that’s tax-free. And a federal tax refund. To round out my list, Joe.

JA: Is that it?

AC: Yeah. Well, they got the Roth IRA, which is a good one, but they’re missing some. Municipal bond interest, that’s tax-free. Missing that one.

JA: Well, it’s the Gazette from…?

AC: Well, it’s the Ventura County Star.

JA: Who wrote it? Can we give ’em some credit?

AC: Sure, let me get my glasses. It’s Sandra Sunken.

JA: Sandra Sunken. Ever heard of municipal bonds, there Sandra? What else you got? What else isn’t on the list that should be?

AC: Well, I think you could make a good argument that capital gains could be tax-free if you do tax loss harvesting.

JA: Or if you’re in the 15% tax bracket or lower. That’s a 0% tax. What else ya got? Was real estate income in there? Depending on depreciation?

AC: Well, it was in there for the 14-day rule. But yeah that’s another good point, which is when you buy a rental property, you may have positive income, but you get to write off a portion of that property each and every year – that’s called depreciation. So you may have positive cash flow, but you’re not paying any taxes on that currently.

JA: Yeah and you could do a cost segregation study on it too? Accelerate that depreciation? That could give you some tax-free income. (laughs)

AC: Sure, yeah you sure can. (laughs)

Senate Majority Leader Mitch McConnell says that, after the lawmakers return from their recess next month, the Republicans will use budget reconciliation to pass the first major tax reform in three decades. But President Trump and the GOP remain divided on how to deliver the biggest tax cut in history. How might income tax, estate tax, and business tax change? Visit the White Papers section of the Learning Center at YourMoneyYourWealth.com and download the white paper, “Tax Reform: Trump Vs. House GOP” to find out. Are your tax strategies at risk? Get year end tax-planning tips that can help you stay on track in the midst of uncertainty. Download the Tax Reform white paper to find out more. Visit the White Papers section of the Learning Center at YourMoneyYourWealth.com. Now, Joe and Al discuss some of the tax changes that might be under consideration.

39:59 – 4 Tax Breaks That May Be on the Chopping Block

AC: There’s a lot of discussion about our government reducing taxes, reducing the tax rate but trying to keep this revenue neutral, which means you reduce taxes, but somehow you either still have as much money coming in, or maybe you spur enough growth in the economy that there’s additional money coming in.

JA: Let me ask you this question, and this is kind of on topic, but – I know you’re not an economist. So we’ll take this with a grain of salt. “Why do we need to pass health care before tax reform? is what a lot of people are saying. People get confused with that because it’s like, “Well, what does health care have to do with taxes?”

AC: Yes that is a reasonable question. Well, I think it had to do with the surtax may be, the net investment income tax of 3.8% when you’re married and your income’s over $250,000 or single $200,000.

JA: And that’s on capital assets, so you pay your capital gains tax plus the additional 3.8%.

AC: Yeah, or interest dividends is passive income, it could be a rental real estate, things like that. It’s also on earned income, Joe, it’s .9%, almost 1% of salary, and self-employment type earnings. So anyway, that’s my best guess as to why they wanted to change that first.

JA: So they were saying, “OK, well here, we’re going to repeal the net investment income tax. We’re going to repeal the other .9% on ordinary income.”

AC: So if we don’t have Obamacare, we don’t need the net investment income tax anymore, which is one of the things that they want to get rid of in the tax plan. So I think that’s why they went in that order.

JA: So they’re thinking, “OK well how are we going to fund this new health care plan if we don’t have this tax revenue?”

AC: Yeah, if we don’t have a new cheaper health care plan. Right. But that doesn’t appear to be happening. So, on the taxes. And so the way that you try to lower tax rates, and still have this work out in terms of money flowing in, is to reduce deductions. Or curtail an amount of deductions that you can take. And so I thought the Kiplinger tax letter did a pretty good article on some of the most discussed tax breaks that may be on the chopping block in one way or another. And the first one, right off the bat, we’ve talked about this, is tax breaks for retirement plans and retirement accounts. And Joe, they’ve talked about maybe saying, “all right, when you get to a certain level of retirement account, you can’t put any more in.” They’ve talked about maybe we won’t allow the retirement account deduction anymore. Maybe it just goes into a Roth IRA, which you and I have talked about, which actually might be a good thing for you and me and everyone else, but it would be a huge time bomb for the government.

JA: God that is so short sighted. It’s crazy.

AC: (laughs) It helps today, but not in the future. Or they could potentially say you don’t get a tax deduction today. It’s not a Roth, but you get basis. So maybe that’s what they’re thinking, that could be another thing in terms of your retirement accounts. Meaning that you put in, right now it’s $18,000 into a 401(k). And you do that for a few years. And let’s just do one year through, just to make the math easy.

JA: So it would be like an after tax contribution. So you have the basis in the account.

AC: Yeah. So you’re $18,000 grows to $30,000. So you pull the $30,000 out when you’re in retirement, $18,000 is tax-free, because you have tax basis. $12,000 you pay tax on. So that could be a possibility.

JA: We’ll see. I mean, some of the laws, or of these ideas that come out – I don’t know. I guess they’re looking for years down the road. Right?

AC: Right. But you can’t reduce tax rates without some kind of other side of the equation.

JA: Exactly. Touching retirement accounts just doesn’t seem right to me, and that’s just my personal opinion. Some people might argue with me, but if you look, I mean you and I have been doing this for a long time. I mean we’ve been doing this radio show for over 10 years. You’ve been a CPA for 30 some odd years. I’ve been in the financial planning business almost 20 years. And it’s like, we see all sorts of individuals, and I would say the majority of them – even though we see, that have saved money, are still behind. How about all the people that don’t have anything saved? I mean we talked about the median balances in retirement accounts, and we’re living a lot longer, and healthcare is on the rise and inflation… I mean there are all sorts of obstacles ahead of us in retirement. And then let’s just skew some of the benefits that we already have to disenchant us to even save anymore. Yeah, that’s a great idea.

AC: When you think about, what’s one of our biggest issues in our country, it’s retirement. It’s the retirement crisis. It’s the baby boomers retiring without enough savings. And so is that really what you want to do? Make it more difficult for people to save for retirement?

JA: Is that the biggest crisis in front of us?

AC: I said one of the biggest ones. I’m not gonna say it’s the biggest one. World peace. (laughs) Anyway, the next one Joe that I want to discuss in this article is the exclusion from tax for employer provided health insurance. That’s been discussed. In other words right now, when you work for an employer and they pay for your health insurance, it’s a tax-free benefit for you. You don’t pay taxes on that benefit. It’s kind of a compensation if you will, that you don’t pay tax on.

JA: Sure, if your premium is $500 a month and your employer pays for that, you’re not paying tax on that $500.

AC: And interestingly enough, this is probably about, I’m going to say four or five years ago, the W-2 started showing the amount of employer paid health insurance premiums, and the CPA community figured, well, I guess that’s because that’s what they’re thinking. At some point they are going to tax that, or maybe like Social Security, they’ll start taxing 50% of it or, who knows. But that could be a source of revenue, something that you’re getting as a tax-free benefit that you’re not paying taxes on right now. The third one here is favorable tax rates on qualified dividends and long term capital gains, because we know that the capital gain rate, when you buy a stock or mutual fund that’s outside of a retirement account, you hold it for at least a year, and sell it a gain, that capital gain is taxed at a special capital gains rate, which right now is zero, 15%, and 20%. Zero, 15 or 20. And the 0% rate is when your taxable income, when you’re married if it’s below about $75,000, and single, below about $37,000, you don’t even pay any taxes on that capital gains rate. Then it jumps to 15% after that, and then 20% rate at the highest tax bracket. But let’s just think about that. The highest tax bracket, so you’re paying 20% on your capital gains, but you’re paying 39.6% on your other income. So the tax at that level is about one-half of the regular tax. And there’s always been discussion about, maybe that’s not fair, and I don’t really want to get into economics, but I will just bring this up and say that some support the idea of capital gains as important for our country, because people want to invest in companies, and companies grow, and they create jobs. There’s another camp that says that’s an unfair tax, and the rich are getting off and paying a lower tax rate. So, I’m not going to debate one or the other, but those are the two sides of the argument.

JA: Well I would say most individuals, just the average Joes. Most of their assets are in their retirement accounts. They don’t have a lot of non-qualified assets. The likelihood that we see, that people that have a lot of assets that are outside of retirement accounts, in very rare cases it is because of diligent savings. It could be stock options, they worked for a company that had stock options and all of a sudden the stock blew up. They were small business owners that sold a business. They were real estate investors that potentially sold real estate, or they inherited the money.

AC: Yeah, inherited or they or they won the lottery. But that doesn’t really stick around too long. (laughs) And then one other one, we’re almost out of time for this segment, Joe, but it is the Social Security benefits, which were non-taxable at one point, and then it got to the point where they were up to 50% taxable. And then I think it was, in the early 2000s, it went up to 85% taxable at certain income levels. 85% of your Social Security income is subject to tax. And could they make that fully taxable? They could.

JA: Right because I mean if you go back to your earlier comment with health insurance, is that it started out at 50% is because the employer put in the other 50. You put in 50, the employer put in 50, and they’re like, “OK, well here, you pay the tax to go in, but you had that added benefit from your employer, so we’ll tax that out from your employment benefits.” So that’s why it started at 50% and then they increased to 85, just to get a little bit more cash. There you have it.

Visit YourMoneyYourWealth.com and sign up for free financial assessment with a Certified Financial Planner. Find out if you’re on track for retirement. How much money will you need? What Social Security strategies are available to you? How much income can you get from your portfolio? Make sure your retirement strategy is aligned with your retirement goals. Sign up for a free two-meeting assessment with a Certified Financial Planner at YourMoneyYourWealth.com

49:35 – Medicare Mistakes with Jason Thomas, CFP

JA: We’re talking Medicare and here’s what I want to do Alan. We have a new individual employee at our office, his name is Jason Thomas, he’s a Certified Financial Planner, and his main focus and job and role at the firm is financial education.

AC: Right. Mainly for us. For you and me. (laughs)

JA: Yeah right, exactly. (laughs) Right now we’re talking Medicare, and we’re out of ammunition. So I’m going to call Jason Thomas right now. He does not know we’re calling him.

AC: He doesn’t?

JA: He doesn’t. This is going to be like… we’ll see if this works. This could blow up very badly, or this could be kind of fun. So we’re going to call Jason, and we’re going to ask him some Medicare questions right on the spot. So this is unrehearsed. He has nothing. We have cheat sheets. We have a full volume of Medicare stuff I can’t even understand. So, let’s see if we can get Jason Thomas on the line.

AC: OK. I like it.

JA: Andre can we, like, listen to the phone ring?

Pure: Thank you for calling Pure Financial Advisors, this is Phyllis, how may I help you?

JA: Yes Phyllis, can I speak with Jason Thomas, please.

Phyllis: And who is calling?

JA: Uh, this is Joseph Anderson.

Phyllis: Oh. (laughs) One moment, please.

AC: She knows you.

JA: I think she’s heard of me before. Oh, she’s going to tell him that it’s me though, I should’ve said a different name.

AC: But he doesn’t know he’s going to be live on the radio.

JA: No, he has no idea. He probably thinks, “Hey, what are you doing on Saturday? You want to grab a beer?” I don’t know the hold would… oh, wait for it. No, nothing yet. OK.

AC: He’s outside the garden.

JA: What’s he doing? He should be sitting in his office, Alan.

AC: On Saturday? We work him pretty hard.

Pure: “We sincerely appreciate you….”

JA: We get to work on this hold. (laughs) This awful customer service we have is awful.

AC: We finally tested it and we failed.

JA: Well, like I said. When you do things off the cuff, sometimes it works and sometimes it doesn’t. Well, I suppose as we’re listening to this nice hold music…

AC: We can continue on with our discussion.

JA: Jason Thomas, Certified Financial….

JT: This is Jason.

JA: Jason, Joe Anderson, and Big Al Clopine. You’re live on the radio, and we just thought we’d just give you a call to test your Medicare knowledge. Are you ready?

JT: I am definitely ready. Good to talk to both of you. (laughs)

JA: All right, we got about seven minutes, and I want you to give me as many Medicare mistakes as possible that people do when they look at Medicare, when they enroll in Medicare, or when they actually have it. Go!!

JT: Great, you’ve got to give me a bell ding when we’re almost done (laughs). So first one, big deal that a lot of people forget, is to wait to disenroll for B, that’s doctor visits and medical care, or D, which is drug care. You don’t have to apply for either of those at any given time, but if you don’t do it when you’re initially eligible, and you don’t have some type of exception like you have your employer’s coverage instead, then you’re going to pay a penalty later on. Plus, you might actually need the coverage. So that’s something you’re definitely going to want to do.

Another thing that people commonly have a mistake is accidentally disenrolling themselves from their Advantage plan. So if you’re in a Medicare Advantage plan, you can either be in that plan, or on a prescription drug plan that only has prescription drugs. But you can’t be in both at the same time. So if you’re thinking you might be able to double dip and get better drug coverage than what’s in your Medicare Advantage plan by buying another drug plan, it will actually automatically disenroll from the Medicare Advantage plan that you’re on. Same as if you happen to purchase a different Medicare Advantage Plan. Disenrollment is automatic. So if that’s what you intend to do, then fine, but if that isn’t your intent, then please avoid purchasing another drug plan, because that’s what would happen.

Another common mistake that people make is that they do not understand the difference between being on one side of the fence, which is Medicare Advantage, and the other side of the fence, which is using their red white and blue card. Kind of like with other products, like a supplement plan, or maybe also a drug plan. So you’re going to be in one of those paths or the other, that’s kind of a fork in the road, and you choose which side you would like to be on, but not both at the same time. So you cannot purchase a supplement plan at the time you purchase an Advantage plan – it wouldn’t do you any good because that supplements original Medicare, which is in your red white and blue card. Those are the top three. Do we have do we have time for more?

JA: Keep goin’, come on!

AC: I got a question! So when you originally enroll for Medicare, so then you have to pick between these two different plans – can you change later on?

JT: Exactly, one of the good things about the Medicare system is that you can make your choices at various points through your stages as a beneficiary. So let’s just say for supplement plans, for example, you have the opportunity to enroll for one of those plans at any point in time. But if you ever leave that side of the equation, and you have a supplement plan, and you ever wanted to come back again, you could do it whenever you want, but you would just have to undergo medical underwriting. So there’s a little bit of a cost or risk to leaving the supplement side of the page, although you can certainly do it and come back. On Medicare Advantage plans, those do not ever underwrite you for your medical condition. So you can opt to change that at any future year, during the annual election period. So if you’re with Great Insurance Company X, and you say, “Well, I’d like to stay with it,” just do nothing and you’ll be with them next year. Now, that plan will be different. That’s kind of like you got to 2017 Lexus right now, you’re going to have a 2018 Lexus that could be fairly similar, or they could totally change the body style up. So that’s something you’ll want to consider. But you could also say, “it’s 2017, I got the Lexus now, I’m going to get the 2018 Jaguar or Infiniti.” And that point at the end of the year, from October to December, where every single commercial that’s on TV is for Medicare, is the time that you’re able to do that. And you could move on that side of the page, for Medicare Advantage, every single year, or any time that you have a particular period that allows you to do it mid-year. Like you have extra help for prescription drugs or Medicaid coverage, for example, those people have a little more flexibility.

JA: What about issues with Tri-Care?

JT: Tri-Care, if you have Tri-Care, which is the health insurance for those in the military, or retirees, then you would not want to sign up for a Medicare Advantage plan that contains prescription drugs, or for a stand-alone prescription drug plan, without first consulting them, because it can not only affect your Tri-Care benefits now, but potentially for the rest of your life. In some parts of the country, you might have a Medicare Advantage plan that’s called MA Only. That means it does not have prescription drugs. There are very few of those, and some of them even offer a rebate if you enroll in the plan. So instead of just being zero premium, they might actually give you a little bit of money back, because they’re not responsible for the drug portion. But your area of the country may or may not even have a Medicare Advantage Only, without prescription drugs. Those are fairly rare. That would be the only one that you could safely enroll in, knowing that it would not affect your Tri-Care. Anything else, stand-alone prescription drug, or Medicare Advantage with the drugs inside the plan, you’re going to want to shy away from before giving them a call to figure out how that would affect your specific situation.

JA: Do you have a cheat sheet or a volume of Medicare information in front of you right now, Jason Thomas?

JT: I do not, I do not.

JA: That’s all in your head! That is something special.

AC: That’s better than us.

JA: All right, One last question. Give me your best joke.

JT: My best joke, oh my. My best joke for radio consumption. Well you know, Joe, I’m gonna be 40 in about a year and a half, and I finally feel like I’m almost ready to mature and grow up and say the one phrase that every guy wants to tell that special woman in their life, which is, “you know, I’m old enough to be your father.”

AC: (laughs) Another year and a half you can do that.

JA: You are something special, my friend.

JT: You asked me to pull one out that would be suitable for radio consumption. That was the closest I could get.

JA: Oh look at that. This guy is something else. That’s Jason Thomas, folks. He’s a Certified Financial Planner. He is part of our financial education team at Pure Financial. Jason, thank you for your time, my friend.

JT: Hey thanks for having me. Good talking to you.

JA: All right we’re going to take a break. Show’s called Your Money, Your Wealth.

That was just the tip of the iceberg on Medicare. Part B, Part D, Medicare Advantage, Tri-Care, enrolling, disenrolling… There is so much more to know about Medicare if you’re approaching age 65. Joe and Jason are creating a video series to help you with that. Just visit YourMoneyYourWealth.com to sign up to watch their new Medicare video series, and you’ll be notified as soon as it’s available. That’s YourMoneyYourWealth.com for the upcoming Medicare video series.

59:28 – Al Dislikes the Eagles & More Concerns of Wealthy Investors

JA: I heard you hate the Eagles.

AC: I don’t hate the Eagles, they’re not my favorite though.

JA: You don’t really care for the Eagles?

AC: Not particularly.

JA: Really. Why?

AC: Why, do you? (laughs)

JA: Well sure. Why wouldn’t you like the Eagles?

AC: I don’t know. Makes no sense, because I like acoustic music, but I’ve never, for some reason, just never clicked with me. Who told you that?

JA: Jason Thomas.

AC: How would he know that?

JA: Because he says “Al is a weird man.” I’ve been spending some time with Jason Thomas, he’s the latest addition to Pure Financial Advisors. He’s part of our public education team that I run. So yeah, we’re chanting, he’s like, “Yeah, Al’s weird. He doesn’t like the Eagles.” I was like, “How do know that? Where the hell did that come up in conversation?”

AC: Did I say that on a podcast?

JA: No, that was the first thing that he said that you talked about in the interview process with him. “Do you like the Eagles?” He goes, “Yeah.” Oh, check! Not gonna hire your ass!” (laughs)

AC: (laughs) I told you not to hire him! Wow. I remember talking to him about music because he loves music. Because I asked him what he likes to do in his spare time, and it came up with music. And I don’t know, I don’t remember saying that, but maybe I did. But yeah, I mean, I don’t dislike the Eagles, but I’m not like a raving fan. I’ll put it that way. Leave it at that. That I do like James Taylor. He’s probably my favorite. I like a lot of the acoustic rock type of sound, which I know you don’t call rock, you call it, I don’t know what you call it. Folk music. (laughs)

JA: Yeah. I was going to say something but it was probably not… (laughs) OK. I’m going to go through a couple of quick stats here then we’ll wrap it up. Health is the top concern for wealthy retirees: 73%, that’s their biggest worry is their health.

AC: Really? Well, Fidelity tells us that a couple age 65 is going to have to spend about $250,000 to $300,000 over their lifetime, out-of-pocket costs.

JA: So but here’s the fallacy I think. A lot of times people, what’s your biggest fear in retirement is running out of money. That’s 21%.

AC: So it’s more health. OK.

JA: I think that’s true for most, I would imagine.

AC: Well if you don’t have your health what does money matter?

JA: Right. Well, if you don’t have your health and you don’t have any money, what the hell, I mean right? 47% not having anyone to take care of them. Half. Are you worried about that, Al?

AC: No.

JA: You’re just going to take care of yourself?

AC: I got Annie and then I get the kids.

JA: Yeah they do still live at home and they’re 45. You still bathe them on Sundays.

AC: (laughs) They’re great kids.

JA: 21%, downsizing their lifestyle. Wealthier retirees are seeking portfolio growth. 84% of these people surveyed plan to continue to grow their assets regardless of age. 74% says equity has offered the best returns, regardless of what age. Well sure. With today’s low-interest rates, there is more need to seek higher returns, even if you’re older. 71% said that.

AC: Yeah, they’ve been listening to our show, finally.

JA: Given I plan to pass assets to heirs, I’d rather keep more equities, even as I age. That was 51% surveyed.

AC: Really? Wow, like it.

JA: If you want to get ahold of this survey, we’re going to have it in our show notes. We’ll also have a link to Walter Updegrave’s website on our show notes, on our podcast, you can go to YourMoneyYourWealth.com to get those. Hey, we’ve got to get out of here. Hopefully enjoyed the show. Next week, we have this guy, Jordan Goodman coming on the show, Al. And I listen to his podcast regularly. It’s not because – and I’m going to say this now because he’s not on the air. I like Jordan. But some of his guests, it’s like train wreck city. Every single one of them, they’re pitching some weird products, and it’s like a money answer show. So I think people pay to get on his show or something like that.

Ac: Probably so they can pitch their products.

JA: So it’s kind of like a pitch and dump. Jordan’s been a big figure in the financial media for four years. So I’m excited to have him on. So he’ll be joining us next week, we’ll probably do some other fun stuff. So catch us next week as well. For Big Al Clopine, I’m Joe Anderson, shows called Your Money, Your Wealth.

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So, to recap today’s show: When Congress returns from its recess and looks at tax reform, tax breaks on retirement accounts, employer provided health insurance, Social Security and favorable tax rates on qualified dividends and long term capital gains may be on the chopping block, but Roth IRA earnings, cash gifts, rental income, inheritances and federal tax refunds are all sources of tax free income, so we’ve got those going for us.

Special thanks to our guests, Walter Updegrave and Jason Thomas. Learn more about retirement from Walter at RealDealRetirement.com. If Medicare is in your near future, visit YourMoneyYourWealth.com and sign up for Jason Thomas and Joe Anderson’s Medicare video series, coming soon.

And Joe wants it long, straight, curly, fuzzy, snaggy, shaggy, ratty, matty, oily, greasy, fleecy, shining, gleaming, streaming, flaxen, waxen, he really wants Andre’s hair.

Subscribe to the podcast at YourMoneyYourWealth.com, through your favorite podcatcher or on iTunes, where you can also check out our ratings and reviews. And remember, this show is about you! If there’s something you’d like to hear on Your Money, Your Wealth, just email info@purefinancial.com. Listen next week for more Your Money, Your Wealth, presented by Pure Financial Advisors. For your free financial assessment, visit PureFinancial.com

Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision.

Your Money, Your Wealth Opening song, Motown Gold by Karl James Pestka, is licensed under a Creative Commons Attribution 3.0 Unported License.